HJ Sims Provides High Leverage Acquisition Financing for Senior Living Portfolio in Florida
An experienced senior living ownership group (the “Borrower”) partnered with a regional operator to acquire two senior housing properties in Florida (the “Portfolio”). The Borrower owns over 40 skilled nursing and senior housing properties across eight states. The properties provide a combination of independent living, assisted living, and memory care units catering to both private pay residents and residents participating in Florida’s Medicaid waiver programs for assisted living services. The Portfolio provided a strategic growth opportunity in a key market for the Borrower who already owned a number of communities in the state.
HJ Sims partnered with a national bank (the “Partner”) to propose a high-leverage, unitranche first mortgage loan to fund the acquisition of the Portfolio. The proposed first mortgage loan combined two tranches of debt into a single debt instrument with the Partner providing “Tranche A” of the loan on a priority basis and HJ Sims providing “Tranche B” of the loan on a subordinate basis. From the perspective of the Borrower, the loan functions as a single debt obligation under a single loan agreement and security package.
The Borrower found the first mortgage financing attractive for the acquisition as it provided higher leverage compared to a conventional bank loan, allowing them to avoid raising unsecured subordinate debt at a higher cost of capital or diluting its ownership in the Portfolio by partnering with additional equity investors. The loan was structured with a two-year interest only period followed by a 25-year amortization schedule. The first mortgage loan was partial recourse with burndown provisions upon reaching certain performance thresholds.
In combination with its bank Partner, HJ Sims provided a $20.5 million first mortgage loan to fund the acquisition of the Portfolio as well as other expenses associated with the financing. Under firm timing deadlines and with multiple parties involved, the loan closed quickly, meeting the expectations of the seller and all involved. The customized financing structure helps the Borrower preserve strategic capital for additional growth opportunities and for the support of other communities in its portfolio. HJ Sims excels in providing customized, timely financing solutions allowing owners and operators to focus on providing high-quality care and services.
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